McDonnell v. First Unum Life Insurance Co.

On October 27, 2010, Plaintiff Gail McDonnell ("McDonnell") filed this action, arising under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C.A. § 1001, against Defendants Morgan Stanley & Company Incorporated Disability Plan[1] and First Unum Life Insurance Company ("First Unum"). (Compl. ¶ 1.) Plaintiff argues that Defendant First Unum improperly denied her application for long-term disability benefits; Plaintiff seeks to "recover benefits due under an employee benefit plan, to clarify the rights of plaintiff to future benefits under such plan, and to recover attorney fees and costs." (Id.)

On April 2, 2012, McDonnell and First Unum filed cross-motions for summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure. On June 16, 2012, both parties timely filed their opposition papers. On July 6, 2012, both parties timely filed their reply papers. Oral argument was held on August 16, 2012. For the reasons stated below, the parties' cross-motions for summary judgment are denied.

McDonnell informed one or more of her doctors that on or about January 29, 2007, while on a business trip to Las Vegas, she was hospitalized for two days due to sharp chest pains, heavy chest pressure, difficulty breathing, and extreme fatigue. (See Pl.'s 56.1 Stmnt ¶ 17; Def.'s 56.1 Resp. ¶ 17; R.386, 417, 586-622.) On January 31, 2007, McDonnell stopped working for Morgan Stanley. (See Pl.'s 56.1 Stmnt ¶ 18; Def.'s 56.1 Resp. ¶ 18; R.141, 215.) On February 6, 2007, McDonnell was hospitalized again due to continuing symptoms plus an inability to stand, which was accompanied by dizziness and confusion. (See Pl.'s 56.1 Stmnt ¶ 19; Def.'s 56.1 Resp. ¶ 19; R.386, 417.)

A. McDonnell's Benefits Claim Submission

On or about July 2008, McDonnell submitted an application for long-term disability ("LTD") benefits to First Unum.[5] (See Pl.'s 56.1 Stmnt ¶ 145; Def.'s 56.1 Resp. ¶ 145; R.133.) By letter dated August 18, 2008, First Unum notified McDonnell's counsel that her claim had been filed late, that the reasons she provided did not excuse the late filing, and that First Unum was therefore closing her claim. (First Unum's Rule 56.1 Statement ("Def.'s 56.1 Stmnt") ¶ 13; Pl.'s Response to Def.'s Rule 56.1 Statement ("Pl.'s 56.1 Resp.") ¶ 13; R.214-27.) Nevertheless, by letter dated January 6, 2009, First Unum notified McDonnell's counsel that while the claim remained closed, "we will be reviewing her medical records, once requested and received, to make a decision on her claim for benefits.'" (Def.'s 56.1 Stmnt ¶ 14; Pl.'s 56.1 Resp. ¶ 14; R.270-71.) First Unum then asked McDonnell to provide a list of the treatment providers she had seen since January 2007, along with the dates of service. (See Def.'s 56.1 Stmnt ¶ 15; Pl.'s 56.1 Resp. ¶ 15; R.270.)

On February 5, 2009, Leo Shea, Ph.D. ("Dr. Shea"), a neuropsychologist, completed a Neuropsychological Evaluation Report, which assessed McDonnell's cognitive function and her ability to meet the demands of her position at Morgan Stanley based on his July 8, 2008, July 28, 2008, and September 22, 2008 examinations of McDonnell. (See Pl.'s 56.1 Stmnt ¶ 149; Def.'s 56.1 Resp. ¶ 149; R.385-401.) Dr. Shea noted that while McDonnell's "clinical picture might be seen as one representing a Conversion Disorder or Somatization Disorder, her diagnosed Lyme disease represents a true organic disorder that has contributed to her multiple functional, emotional, and cognitive reductions.'" (Def.'s 56.1 Stmnt ¶ 42; Pl.'s 56.1 Resp. ¶ 42; R.396-97.) Dr. Shea concluded that McDonnell "does not have the mental stamina or consistent cognitive ability'" to meet the demands of her job at Morgan Stanley or "any work she might attempt'" for the foreseeable future. (Pl.'s 56.1 Stmnt ¶¶ 150-52; Def.'s 56.1 Resp. ¶¶ 150-52; R.397-98.)

In May 2009, McDonnell submitted a statement prepared by her attending physician, Dr. Alan Pollock ("Dr. Pollock"), who diagnosed her as suffering from Lyme Disease. (See Def.'s 56.1 Stmnt ¶ 16; Pl.'s 56.1 Resp. ¶ 16; R.1109-10.) Although Dr. Pollock stated that McDonnell had "no significant physical restrictions, " he also stated that she should sit, stand, and walk for no more than one hour each during a workday and concluded that she was unable to engage in "intellectual work, processing new material, recent memory, judgment[, or] verbal expression." (See Def.'s 56.1 Stmnt ¶ 16; Pl.'s 56.1 Resp. ¶ 16; R.1109-10.)

On October 5, 2009, Dr. Black requested clarification from Dr. Shea concerning "what clinical indications or medical information you have seen that would support a diagnosis of chronic Lyme disease, resulting in cognitive dysfunction.'" (Pl.'s 56.1 Stmnt ¶ 178; Def.'s 56.1 Resp. ¶ 178; R.1425-26.) Dr. Shea responded by stating that whether or not McDonnell suffers from Lyme disease "is a determination made by an M.D. not a Ph.D. - it is in my report because that is the medical DX she was given[.]'" (Pl.'s 56.1 Stmnt ¶ 179; Def.'s 56.1 Resp. ¶ 179; R.1431-32.) Dr. Black did not follow up by contacting any of the other physicians who diagnosed McDonnell with Lyme disease. (See Pl.'s 56.1 Stmnt ¶ 180; Def.'s 56.1 Resp. ¶ 180.) On October 13, 2009, Dr. Black stated that "[a]s a difference of opinion [exists]... between the conclusions[] of Dr. Shea and [Dr. Black], a DMO Review is necessary[]y to resolve this difference.'" (Pl.'s 56.1 Stmnt ¶ 181; Def.'s 56.1 Resp. ¶ 181; R.1435.)

On September 22, 2010, Daniel Benincasa, Psy.D. ("Dr. Benincasa"), who is boardcertified in Forensic Psychology-Neuropsychology, completed a written review of McDonnell's claim file[21] in which he concluded that he agreed with the opinions of First Unum's OSP psychologists Dr. Black and Dr. Spica that McDonnell's "primary condition is behavioral and psychiatric in the form of Conversion and Somatoform Disorders."[22] (Pl.'s 56.1 Stmnt ¶¶ 268, 270; Def.'s 56.1 Resp. ¶¶ 268, 270; Def.'s 56.1 Stmnt ¶ 89; Pl.'s 56.1 Resp. ¶ 89; R.1775-80.) Dr. Benincasa further stated that Dr. Shea, McDonnell's neuropsychologist, "mistakenly believes that the claimant has Lyme disease... [but] he does not have the benefit of all the medical data on hand and the professional medical reviews completed.'" (Def.'s 56.1 Stmnt ¶ 90; Pl.'s 56.1 Resp. ¶ 90; R.1779.)

By letter dated October 1, 2010, Denise Laverriere ("Laverriere"), First Unum's Lead Appeals Specialist, informed McDonnell of First Unum's determination to uphold its determination on administrative appeal and thus apply the MIL to McDonnell's benefits claim. (Pl.'s 56.1 Stmnt ¶ 281; Def.'s 56.1 Resp. ¶ 281; R.1785-92.) In reaching this determination, First Unum relied on the OSP written review by Dr. Lambrew, the written review by Dr. Benincasa, and the other evidence in the administrative record. (Pl.'s 56.1 Stmnt ¶ 282; Def.'s 56.1 Resp. ¶ 282; R.1785-92.) Laverriere testified that when the medical review on appeal is the same as the DMO review at the claims level, "that essentially ends the inquiry." (Def.'s 56.1 Resp. ¶ 294; see also Pl.'s 56.1 Stmnt ¶ 294.)

II. Appropriate Standard of Review

This action concerning the denial of disability benefits is governed by ERISA, 29 U.S.C.A. § 1001, but "ERISA does not set out the applicable standard of review for actions challenging benefit eligibility determinations." Fay v. Oxford Health Plan , 287 F.3d 96, 103 (2d Cir. 2002) (internal quotations and citations omitted). The Supreme Court has held that an insurer's "denial of benefits challenged under [ERISA] is to be reviewed under a de novo standard unless" the benefit plan provides the plan's administrator or fiduciary with "discretionary authority to determine eligibility for benefits or to construe the terms of the plan" (hereinafter, "discretionary authority"). Id. at 104 (quoting Firestone Tire and Rubber Co. v. Bruch , 489 U.S. 101, 115 (1989)).

The plan administrator bears the burden of proving that the deferential standard of review applies. Id . (citing Kinstler v. First Reliance Standard Life Ins. Co. , 181 F.3d 243, 249 (2d Cir. 1999)). Although express use of the terms "deference" and "discretion" in the plan is not necessary to avoid a de novo standard of review, courts construe ambiguities in the plan's language against the insurer. Id . (citing Kinstler , 181 F.3d at 251-52).

Here, both parties agree that the benefit plan issued by First Unum to Morgan Stanley explicitly granted discretionary authority only to First Unum. (Pl.'s 56.1 Stmnt ¶ 8; Def.'s 56.1 Stmnt ¶ 2). The parties also agree that Cleale and Laverriere, the individuals who made and upheld the decision to apply the MIL to McDonnell's long-term benefits claim, were employees of Unum Group, [23] not First Unum. (Pl.'s 56.1 Stmnt ¶ 12; Def.'s 56.1 Resp. ¶ 12.) The parties disagree, however, about whether or not Cleale and Laverriere (the "Unum Group employees") properly exercised discretionary authority under the Plan to make this benefits determination, and therefore the parties disagree about which standard of review - de novo or arbitrary and capricious - the Court should apply here.

McDonnell argues that the Unum Group employees were not granted discretionary authority of their own under the Plan, and that First Unum did not properly delegate its discretionary authority to the Unum Group employees either. (Pl.'s 56.1 Stmnt ¶¶ 9-12; Pl.'s Mem. of Law in Supp. of Summ. J. ("Pl.'s Mem.") at 3). Accordingly, McDonnell asserts that the Court should review the Unum Group employees' benefits decision de novo. (Pl.'s Mem. at 3); see Muller v. First Unum Life Ins. , 341 F.3d 119, 123-24 (2d Cir. 2003) (quoting Firestone , 489 U.S. at 115 (holding that where the person who made benefits decisions does not have discretionary authority, the court applies a de novo review).

First Unum, however, argues that the Unum Group employees were acting as agents of First Unum, and therefore no delegation of discretionary authority was necessary. (Def.'s 56.1 Resp. ¶ 12; First Unum's Br. in Opp. of Pl.'s Summ. J. Mot. ("Def.'s Opp.") at 11.) By First Unum's logic, the Unum Group employees stood in the place of First Unum and therefore properly exercised First Unum's discretionary authority to make benefits decisions. (Def.'s Resp. Pl.'s 56.1 Stmnt ¶ 12; Def.'s Opp. at 11.) In the alternative, First Unum argues that even if the Court were to find that the Unum Group employees did not act as First Unum's agents, First Unum nevertheless properly delegated its discretionary authority to Unum Group. (See Def.'s Opp. at 5.) Accordingly, First Unum argues that the Court should review the denial of benefits to the McDonnell under the arbitrary and capricious standard of review. See Pagan , 52 F.3d at 441 (ruling that the arbitrary and capricious standard of review is used where a fiduciary is acting within its discretionary authority).

For the reasons stated below, the Unum Group employees were not acting as First Unum's agents and First Unum did not properly delegate its discretionary authority to Unum Group. Accordingly, the denial of benefits to McDonnell is reviewed under the de novo standard of review.

A. The Unum Group Employees as Agents of First Unum

In support of its argument that the Unum Group employees who made McDonnell's benefits denial were acting as agents of First Unum and thus properly within its discretionary authority, (Def.'s Opp. at 10), First Unum relies on two well-established principles of state contract law: (1) a corporation can only act through its agents, see Braswell v. United States , 487 U.S. 99, 110 (1988), and (2) a corporation's agents need not be employees of the corporation, see Sullivan v. LTV Aerospace and Defense Co. , 82 F.3d 1251, 1255 (holding that outside directors of a corporation, who were not employees, were ERISA fiduciaries). Accordingly, First Unum argues that it could only act through agents to render a decision on McDonnell's application for benefits, and that it engaged the Unum Group employees for this purpose. (See Pl.'s 56.1 Stmnt ¶ 8; Def.'s 56.1 Stmnt ¶ 2). Therefore, First Unum contends that because it had discretionary authority ...

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